• Friday, March 29, 2024
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Key success factors for SMEs in 2019

Access to credit is a key catalyst for MSME growth

So much has been said and also done concerning the development of the SME sector, not just in Nigeria but in several other parts of the world.At the African continental level, for instance, the Africa Union Commission (AUC), in its search for the evolution of “competitive, diversified and sustainable economies in Africa underpinned by dynamic, entrepreneurial and industrial sectors that generate employment, reduce poverty and foster social inclusion”, established the Enterprise Africa Network (EAN). The Network is a flagship initiative of the AUC, which aims at implementing the Business Development pillar of its Africa Master Plan for 2017-2021. The initiative would provide services relating to the developmental needs of African SMEs, including international partnerships with the private sectors of other economic groupings, including the European private sector. It will also offer advisory services for international growth as well as support for business innovation.

The Enterprise Africa Network therefore becomes a strategic institutional resource, to facilitate the realization of the objectives of the AUC by confronting the key obstacles hindering SME development and growth. It hopes to promote the participation of SMEs in the formal economy of their respective countries,as well as in regional and global trading spaces by tackling lack of access to markets and market intelligence, stifling regulatory barriers and hostile environment.

Domestically, several funding and capacity building initiatives have been implemented. The Central Bank, the Bankers Committee and other stakeholders have established several on-lending facilities for the benefit of SMEs. It is now a popular view that the availability of funds is no longer a major challenge of SMEs, even though accessing such funds may still be a bit of a problem. It is most probable that this challenge prompted the Central Bank to contemplate the establishment of a nation-wide government microfinance bank – an idea not supported by this column. We have unsuccessfully used that route before through the Peoples Bank. Besides, the scares of government’s incompetence in business is “everywhere dense” in Nigeria

As 2018 closes, there is need for operators in the SME sector, which has the most positive impact on the masses, to brace up, rethink its strategies and retool its operational modalities, so as to maximally profit from the opportunities that may arise in 2019. In this regard, we attempt here to highlight some of the attributes and strategies that must be manifest in the affairs of those SMEs that will click Champaign glasses this time in 2019. Before that, a cursory look at some aspects of the environment.

The Nigerian economy is growing at less than 2 per cent per annum as against its population, currently estimated at 198 million people and growing at a rate of 2.6 per cent – a growth deficit. Ghana’s population of about 29 million people is growing at the rate of 2.2 per cent while its economy grew at the rate of 8.5 per cent in 2017–a surplus and the fastest in five years. Ghana was the first country in Sub-Saharan Africa to achieve the Millennium Development Goal 1 – the target of reducing extreme poverty by half. We never did. Ghana has also become a middle income country. Although Nigeria is not among the 37 Heavily Indebted Poor Countries, debt service is gulping about a quarter of its 2019 budget (N2.14 trillion). The problem is not debt or its service but where the money was put.

The oil market is still soft, with many traditional buyers of Nigeria’s crude, including India, either slowing, looking elsewhere or seeking alternative energy sources. Currently below 2millionbarrels/d output is projected to reach 2.3 million barrels a day – some kind of miracle jump. In short there is no certainty in this rapid production increase. This could negatively impact revenue, cut jobs and put more pressure on the beleaguered households. Relatedly, 2019 will bear the brunt of the general elections activities, which have already negatively impacted the economy. SMEs must therefore guard their loins and brace up for all sorts of negative externalities, including possible delays in the formation of cabinets, depending on who wins the presidential election.All considered, growth may be minimal and there is no need to restate that SMEs have little or no prospects when an economy is stagnant.

The dividends of the failed strategy of neglecting the Warri and Port Harcourt ports and concentrating almost all import trade in Lagos have come to roost. Almost all businesses in the hitherto highbrow Apapa GRA have shut down. Nobody of any economic substance lives in Apapa now, except hapless landlords without an alternative. The economy of Lagos is bleeding but strangely the state is not complaining. Its economists seem to have little understanding of the Apapa disaster on Lagos economy. Nigerians need to know why we neglected the ports in the South-South to ruin Lagos.

Even more important, SMEs must understand and embrace the reality of the time – the world has gone digital. Services are being migrated to the digital space. There is no hiding place for those that hang on to the dying analogue age. On this matter, there will be no standing on the fence. One is either in or out. Furthermore, exploration, discovery and deep utilization of digital platforms,the social media and marketing strategies will be imperative. In this regard, investment in capacity development is vital. Many free offerings have been made in this area but operators must realize that there is actually no free lunch. A small training budget even if it is for the key man alone, is unavoidable.Continuous effort to create bankable projects, the lack of which is a major cause of the financial starvation of SMEs, and of course, general self-improvement of SMEs’ internal processes is important. The time has come for SMEs to differentiate themselves and embrace creative thinking and innovation.

SMEs are not famous for their customer-centricity. The need for repeat business has never been their priority.It is time for SMEs to hold on to the customers they have been able to garner. The only way to do this is first to know who the customers are; listen to them and try to hear what they are saying. This guides the development and deployment of products and services. Owing to the fact that we have never been interested in whether the customer repeats or disappears, we are unable to innovate. Need identification precedes innovation. SMEs that close in on their customers, listen to them and constantly interact through various digital channels will be better able to offer goods and services that meet customers’ needs.

The state of unemployment,which hit 23 per cent in the third quarter of 2018 is not likely to abate. It is probable that more entrepreneurs, willing and unwilling, from the ranks of those structured out of the formal sector by a stagnant economy, will throng the SME space. Competition will heighten and market shares will shrink.In essence, SMEs should expect little or no special favours from government beyond the hard-to-access financial packages still trending. There is also no need to wait and hope that governments will do what they say. The only hope that makes sense is the hope in God. Otherwise, hope is the absence of strategy with an indeterminate outcome.

 

Emeka Osuji